Office vacancies flat as markets wait on technology firms

Office vacancies in Seattle have stayed relatively flat over the past three months, but leading brokerage firms expect the empty space to shrink by early 2014 as tech companies continue to buoy the rental market.

The different firms measure the greater downtown Seattle office market based on varying metrics, so the reported vacancy rates range from about 10 to 15 percent. Two say the rate is trending up and two say it’s down, but all agree it hasn’t moved much since last quarter.

Cushman & Wakefield/Commerce reported the highest vacancy rate, 15.6 percent, a slight dip from the previous quarter. The firm forecasts
a drop in vacancies of “at least two percentage points” going into the first quarter of 2014.

Kidder Matthews reported a small bump in office vacancies, listing the rate at 10.46 percent. The brokerage called plans for new towers in downtown Seattle and in downtown Bellevue by Beacon Capital, Vulcan and Touchstone a sign that “developers expect rental rates to increase strongly … enough to make the projects pencil out.”

Companies took a collective 1.8 million square feet during the quarter, according to a report by Jones Lang LaSalle, and more than 170 firms are “actively seeking space” in Seattle and Bellevue. Together those potential tenants represent
“as much as 4.3 million square feet of potential activity.”

“Statistically speaking, it has been flat,” said David Abbott, a Colliers senior vice president. However, he added, “Once the leases commence for the deals that have been signed, the vacancy will ultimately go down.”

Like the other brokers, he pointed to the 306,000 square feet leased this quarter by Amazon, and leases by others in the technology sector, saying the “tech tenants drive the demand.”

At the end of August, software company RealNetworks will move its roughly 400 local employees from the Seattle Trade & Technology Center on Elliott Avenue to a “more open, high-tech” space across from Safeco Field that’s about half the size, or 90,000 square feet.

Chief Financial Officer Tim Wan said the expected change in office-space economics created an incentive to move the company’s headquarters to new, cheaper digs.

“The vacancy rates are going to go down and the rent’s going to go up,” Wan said. “We said, ‘Let’s lock in a great location and competitive rates.’ ”